By Ohad Zeira, Greg Kahn and Nate Williams
A few stories broke last week fueling speculation about the future of home automation. With the rumored Quirky sale, the Leeo staff layoffs, and the apathetic media responses to Nest’s latest press announcements, it certainly was not a banner week for the Internet of Things (IoT).
Given the nature of these events, skepticism may seem warranted. Even more important, it is natural. Boom and bust cycles have always been part of the adoption of mobile, social media, SaaS, and arguably all technology megatrends. The smart home and broader IoT category is no exception. The 2015 Consumer Electronics Show marked the peak of inflated expectations, but of course, there will be consolidations, failed products, and unsuccessful business models as we make our way to mainstream.
Although there are certainly hiccups on the road to widespread consumer adoption, we have not seen a drop-off in smart home activity. What we are witnessing is the brutal Darwinism of product/market fit playing out at retail stores, online, and in the consumer's home. The only possible outcomes may seem to be WIN BIG or LOSE BIG. But breathe deeply; in the last 10 years, we have made great progress and there’s only more to come:
- Reliability: Compare X10, early Lonworks, and other early home automation protocols to modern connectivity protocols and you will find many improvements. We have the same large players around the table (Qualcomm, Intel, NXP) that made mobile, Wi-Fi, and PayTV real, and we will only continue to see progress in the reliability of these underlying protocols and ultimately the products.
- Affordability: 10 years ago home automation systems from AMX, Crestron, and others routinely cost $25K+ and took a small army of technicians days to install. Today, connectivity module costs are 25% of what they were when the first modern era home automation devices rolled out in 2011-2012 and setup experiences are much smoother.
- Talent: The talent focused on the smart home in 2015 compared to 2005 is unbelievably impressive. Some of the best engineers, product people, business development folks, etc. that spent time in social, SaaS, CE, and mobile have started to focus on the smart home. The flow of talent into IoT is a strong indicator that we are heading in the right direction and will ultimately be able to deliver on the promise of a simple, smart, connected home.
- Consumer interest: In a recent Internet of Things Consortium (IoTC) consumer study conducted via IDC, 65% of consumers stated they were moderately or extremely interested in adopting smart home solutions. Among younger consumers (18-24), that number jumps to 84%. Projected to the US adult population, that equates to a potential market size of 150 million+ Americans. These numbers speak for themselves – interest is alive and well and it’s now up to us to perfect this technology for the mainstream audience and get the word out via marketing.
- New players in the ecosystem: Liberty Mutual and American Family Insurance recently struck deals with Nest to subsidize the cost of smart home products. Retailers such as Target, Walmart, Pirch and Amazon have all made moves to push smart home products and services. As the ecosystem welcomes new players, consumers will benefit from a wider selection of products. New business models, increased interest and mainstream adoption will undoubtedly follow.
The fact is that the IoT is as much a macro trend as it is a category. As connectivity and computing costs continue to decline, our appliances and electronics will be connected to the cloud and to one another. The benefits from proactive maintenance, usage analytics and marketing intelligence are far too great for most brands to ignore. There is, however, a lot of work to be done for the consumer value proposition.
At the Internet of Things Consortium we believe the industry should focus on the following in order to build a sustainable Smart Home category:
- Story Telling: As an industry we focus too much on negativity and scare tactics (privacy/security) and not enough on use cases. Interoperability is important, but cannot be the primary focal point of our stories. Let’s show how these smart devices can solve real life problems.
- Partnerships: When it comes to marketing smart devices, the sooner we get the ball rolling between Madison Avenue, Hollywood and Silicon Valley, the better. Co-marketing will enable broader and more effective storytelling to a mainstream audience.
- Business models: Linear transactional business models are necessary but not sufficient. The inevitable connectivity will open up every home product and service category for disruption, and the winners will be innovating around value capture, not just value creation.
- An integrated approach: We have not even begun to connect the dots between wearables and home automation, home automation and cars, cars and smart cities, and beyond. There is unimaginable value at the intersection of these emerging markets. If this broader scope is what Google is planning with Sidewalk Labs, that is significantly more impactful than what Nest did or did not announce last week.
So while expectations (hype) are returning to normal levels and skepticism is setting in, you can count on one thing: the industry will continue to create the future. We invite you to join the conversation at the IoTC.